hartleys downgrades pen

Uranium stocks feel heat from Japan Robin Bromby From: The Australian March 14, 2011 1:47PM Increase Text SizeDecrease Text SizePrintEmail Share
Add to DiggAdd to del.icio.usAdd to FacebookAdd to KwoffAdd to MyspaceAdd to NewsvineWhat are these?EVEN the market's uranium darlings have taken a pounding today.
Peninsula Energy has been one of the great uranium success stories - at least for those who bought it earlier this year at 3c and rode the stock to 16c.

But the company saw 25 per cent wiped off its value this morning, the stock plunging to 9c with � as at 1pm � 124 million shares being traded.

Peninsula was one of the only uranium stocks to stick its head above the parapet this morning, announcing another stage completed in the permitting process for its Lance project in Wyoming

But Dave Wall at Hartley�s this morning downgraded the stock to �speculative buy�, saying the events in Japan outweighed the positives. Wall says the knee-jerk reaction to the shutdown of nuclear plants in Japan had sent uranium stocks lower across the board, noting that a similar incident in 1979 at Three Mile Island in the US had catastrophic consequences for the industry even though there was minimal impact from what was a partial meltdown.

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Wall says Peninsula is well placed to weather the storm of the present downturn as it is well-funded. Generally speaking, he continues, the risks to the uranium sector have increased; although these are mainly sentiment-driven at present, he thinks it is possible that this may flow over to the regulatory environment causing delays to permitting.

Meanwhile, Foster Stockbroking analyst Toni Addison-Lafferty is recommending investors sell off uranium stocks and buy Caltex Australia. She notes that India may now revisit its planned reactor program, while the closure of reactors in Japan may mean they are out of commission for two years with a consequent dent in the uranium spot price. Caltex, on the other hand, will be a beneficiary of reduction in Japanese refining capacity because of the earthquake, meaning refinery margins will rise.

Generally uranium investors have suffered some serious damage today. In almost all cases, there was a huge number in the sell queues with buyers scarce. If there is any bounce in the uranium sector, those who bought today might prove to be the smart ones. On the other hand, the sector could be in the doldrums for months or years. As anyone who was around at the time will recall, the 1970s had seen large numbers of companies exploring for uranium in Australia. Then the release of uranium from weapons programs (on the back of Three Mile Island) saw the market price plunge and all the explorers packed up and left.

By early afternoon, indeed, we saw some stocks come off their lows. WildHorse Energy had plunged to 38c, but after lunch managed to scrape back to 44c, a 12 per cent decline.

Energy Resources of Australia fell 10.5 per cent to $8.41 while other sharp declines included Paladin Energy (PDN) down 13.5 per cent to $4.09, Manhattan Corp down 16.2 per cent to 88c, Uranium Equities down 23.3 per cent at 11.5c and Toro Energy suffered a 19.2 per cent hit to take it to 10.5c.

Footnote: an alert reader noticed a typographical mistake in our Friday online effort. The 52-week low for WildHorse Energy was not 2.1c but 21c.